Keeping Both Spouses in the Financial Picture

Saly A. Glassman of Merrill Lynch said sparing a spouse the stress of helping to manage the family finances can create long-term problems.Credit
Jessica Kourkounis for The New York Times

NO one likes to be left out. But when it comes to financial matters, excluding one spouse from the decision making can, at the least, lead to unease but, at the worst, cause distrust.

And the excluded spouse can end up managing the family’s money at the worst possible time: after death, disability or divorce.

Why does this exclusion happen? Some people are protective of what they have earned or like to control their spouse. Others are content to ignore money — as long as the things they want or need are paid for.

Yet just as often, this exclusion happens for the same reason that one spouse tends to the yard and the other to the kitchen: it is where their relative strengths lie. But dividing up who handles the money and leaving one spouse in the dark can be financially destructive.

“Sometimes one spouse is trying to protect the other,” said Saly A. Glassman, a managing director at Merrill Lynch Wealth Management and the author of “It’s About More Than the Money” (FT Press, 2010). “They think they’re helping. They don’t want to create more stress. They may be helping in the short term, but it’s problematic in the long term.”

Let’s look first at the risks of doing this and then at the solutions. While these are certainly issues for married couples, they are something that any couple, married or unmarried, needs to consider.

CAUTIONARY TALES Most advisers use the specter of death to shake a couple out of their financial roles. Will your spouse know how to take over the financial affairs of the family if you die tomorrow? Or will grief leave him or her susceptible to unwanted advice?

“We tend to advise on huge areas, but they tend to get cocktail party advice from people they know and love — or don’t love,” said Coventry Edwards-Pitt, managing director at Ballentine Partners, a wealth advisory firm. “Then they can be very vulnerable to advice.”

Disability is equally frightening. Eric Dunavant, president of the Dunavant Wealth Management Group, near New Orleans, had a client who was trying to update his wife on their finances when his kidneys failed. The husband was in the hospital for three months and in a coma for the majority of that time. He recovered eventually, but that was the shock his wife needed to take more responsibility for their finances.

Using money to control or exclude a spouse can, not surprisingly, be a cause of marital strife. “I have a lot of clients come to me in the middle of a divorce, and they’ve said part of the reason they’re leaving is the other spouse hasn’t let them into the finances,” said Dalal Salomon, chief executive of Salomon & Ludwin, in Richmond, Va. “The other spouse is signing tax forms or opening accounts and signing their names to them. And they have no idea what is happening.”

Yet the problems are not always this clear cut. Sometimes, the actuarial tables go against your planning. Ms. Glassman had a male client who was married to a woman 30 years younger. One day, his wife came home not feeling well and never got up from her nap.

“He was totally caught off guard,” she said. “He made all the money, but she did the administration. She took care of everything.”

HOW TO FIX IT So how do you make sure both spouses are included in handling the finances, regardless of the amounts at stake? The simple answer is talking about the problem with the other person and making sure both people go to all meetings. But that is just not the reality for many couples. Here are more concrete strategies.

Ms. Glassman takes a baby step approach toward including the other spouse. She suggested handing over the administrative tasks of bill payment. When both spouses know the electric bill costs about $400 a month, they gain familiarly with the family finances without high consequences, she said.

A next step may be to have them switch some of the static bills, like cable television, over to a credit card with points so they are checking something monthly as opposed to just remembering to pay it. In the process, they’re also getting reward points that need to be managed.

The goal is to get the excluded spouse to sit down and talk about how much the family has in assets and how much it owes on mortgages, car loans and other debt.

“This introduces them to the concept of leverage,” Ms. Glassman said. “You want them to know which types help you and which types harm you.”

It is only then, she suggested, that the couple should have the more conceptual discussions about plans for the future or retirement and how to pay for them.

Then there is the Socratic method. Ms. Edwards-Pitt, whose clients typically have tens of millions of dollars, described what she did as “training the spouse.” She said she labored over explaining concepts and then questioned the spouses about them to be sure they understood. For her, the key is to put together materials that provide information to the spouse who understands the finances while bringing up to speed the one who has historically not cared. This includes assigned reading and lots of diagrams.

“We try to get away from the jargon,” she said. “It’s really important to stop and ask, ‘Does that make sense?’ or, ‘Do you remember this from the meeting before?’ It becomes a different discussion.”

The conversation is often divided between a spouse driven by a portfolio’s performance and one guided by values about how the money should be used. The education process brings those differing concerns to light.

A third approach is purely pragmatic. Ms. Salomon said she began by asking the couple a series of “dream questions” — What would you do if you could do anything? — followed by questions based on their actual financial position.

This helps to gauge each person’s level of understanding of the family’s financial picture. Then Ms. Salomon puts the couple through the life planner process, a program given to advisers in the Wells Fargo Advisors Financial Network. While this does not promise greater inclusion, it does catalog everything a surviving spouse needs to know, from account numbers and passwords to insurance policies and funeral arrangements.

“Going through that process with couples — that’s very powerful,” Ms. Salomon said.

LEARNING CURVE So how long does it take to bring a financially excluded spouse up to speed? None of these approaches is quick.

An ambitious timeline with somebody with a complex portfolio of investments is six months of intensive study, Ms. Edwards-Pitt said. A more realistic one, the consensus was, is two years.

The good news is that couples often feel relieved when the process is completed. But even then, it is not a static state.

Krishna Pendyala, chief operating officer and coach at Waldron Wealth Management, which advises on $2 billion in assets, said he was brought in to talk to a couple at the end of the summer who had $5 million to $10 million in assets — seemingly enough money to live without worry.

In fact, one spouse did think everything was fine. The other, who managed the finances, thought the economy was going to get worse and wanted to be more careful with their spending.

“Two months later, the one spouse who thought they had enough and no reason to cut their spending short has a different perspective,” Mr. Pendyala said. “They have come to a compromise of, ‘I hear you and you hear me.’ ”

And that is a big part of what a marriage is about.

A version of this article appears in print on October 30, 2010, on page B6 of the New York edition with the headline: Keeping Both Spouses In the Financial Picture. Order Reprints|Today's Paper|Subscribe